The nation's food assistance program made $10.1 billion in improper payments last year, according to a recent analysis by the American Legislative Exchange Council (ALEC) responding to USDA data. The 2025 Supplemental Nutrition Assistance Program (SNAP) payment error rate reached 10.62%, a figure the organization calls "a wake-up call for state legislators." For the first time, states will be held financially responsible for these mistakes under recently passed federal legislation.
Payment error rates measure how accurately states determine who qualifies for SNAP benefits and calculate the amounts households should receive. The errors include both overpayments—when households get more than they're entitled to—and underpayments, when they receive less. These are administrative mistakes identified under the SNAP Quality Control system, not fraud cases. The new federal law, the One Big Beautiful Bill (H.R. 1) signed last year, creates a three-tier penalty system: states with error rates between 6% and 8% must fund 5% of their SNAP program costs, those between 8% and 10% must fund 10%, and states above 10% must cover 15%. This marks the first time the federal government won't completely fund SNAP. The 2025 error rate is the first year that could be used to calculate these cost-sharing percentages, which take effect on October 1, 2027.
The financial impact varies dramatically by state size. According to the ALEC report, even the lowest 5% bracket would cost Wyoming over $3 million in additional recurring spending, while California would face more than $627 million. States exceeding a 13.32% error rate receive an extension until 2030, but all others currently meeting or surpassing the 6% threshold are already at risk. The report notes that states can choose either their 2025 or 2026 error rate to determine their cost-sharing percentage, giving them one more year to reduce errors before penalties kick in. States with high error rates must also submit Corrective Action Plans and may face additional financial penalties beyond the cost-sharing requirements.
The report emphasizes that these errors undermine program integrity from both directions. "Underpayments harm the low-income families who rely on the program, and overpayments waste taxpayer dollars and cause public distrust," the analysis states. The USDA has offered support to state agencies working to improve accuracy and has identified best practices from listening sessions held in August 2023. Those practices include giving timely feedback to applicants to prevent multiple submissions and increased backlog, focusing on staff recruitment and retention, and updating data and technology systems. The report frames the problem as both a technical challenge and a test of government effectiveness in managing safety net programs.
State legislators now face a choice: act quickly to reduce error rates for 2026 and avoid the penalties, or prepare budgets for significant new costs starting in 2027. The ALEC report urges states to "take proactive steps to meet the congressional threshold and minimize or prepare for the financial impact on their state budgets." With California potentially facing over $600 million in annual costs and even small states on the hook for millions, the stakes are high. States must balance the urgency of fixing administrative systems with the reality that overhauling eligibility determination processes takes time—and the clock is already ticking toward October 2027.